Transcript Strategic Opportunities for Banca CR Firenze Group

Opportunities
in Italian Regional Banks
Lino Moscatelli
Managing Director
HSBC Italian Banks Conference
London - January 19th, 2006
Growth Over The Years
ROE (adj.)
EVA
7.2%
2.2%
14.0%
9.6%
-9.5%
2.9%
1994
1999
2004
Net income
1994
1999
Shareholdings
2004
1,250
705
Parent
Company
102
69
317
Group
150
265
20
1994
1999
2004
1994
1999
2004
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Banca CR Firenze Group
 The outward expansion from its traditional business
territory led to the transformation into a multiregional banking group
 Investments in consumer credit increased profitability
and stabilised P&L
CR MIRANDOLA
8
CR
SPEZIA
1
Group network
Market Share
CR ORVIETO
28
51
MAIN FIGURES
334
42
46
Financial
advisors
527
loans
11.0 %
funding 15.8 %
Customers
1,000,000
Total funding
€ 36.8 bn
Customer loans
€ 12.9 bn
9M 2005 ROE (annualised)
13.6%
CR PISTOIA
CR
CIVITAVECCHIA
Italian leader in consumer credit
through FINDOMESTIC Banca
3
Recent Achievements
 The 2000 IPO has produced an evolution process which
led to
 Group perimeter enlargement
 Financial assets growth
 Focus on consumer credit
 New structure for the branches network
 Profitability increase
 Capital allocation optimization
 Value creation
4
A Strategic Choice: Consumer Credit
 A fast growing business well-blended into a pure retail
group
 Profitable capital allocation:
 The additional 15% capital stake (from 35% to 50%) was
bought in 2001 at 1.7x book value
 Findomestic average ROE 20%.
Consumer credit weight*
18%
22%
2000
2001
28%
33%
35%
35% stake
50% stake
2002
* Consumer credit pre-tax income / Consolidated pre-tax income. Goodwill excluded
2003
2004
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The Future for Regional Banks: What Mission?
 A local, retail banking group aiming to be competitive
in the long term cannot solely count on the local roots
advantage and on a friendly approach
 Today, the group’s mission must also include:
 a diversified and technically advanced market approach (through
branches & remote banking) in order to offer services and
competitive prices
 a high level of professional competence
 a range of high quality products as wide as that offered by a
large domestic competitor
 a customer approach that is less focused on sales results and
more on clients’ expectations
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Advanced Market Approach
 Three separate channels, three different networks,
one sales supervision
 313 retail branches focused on mass market, affluent and
small business customers
 A close-knit network coverage thanks to 17 Corporate Centers
and 16 Private Banking Centers
 Synergies between channels: Corporate/Private Bkg. and
Retail/Corporate
Head of Commercial Dept.
RETAIL BRANCHES
CORPORATE CENTERS
PRIVATE BKG. CENTERS
633,000
clients*
11,000
clients*
6,000
clients*
Network figures refer solely to Group’s banks where the model has been implemented.
Clients figures refer to Parent Company
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Personnel & Customer Management
 The rollout involved some 800 employees (1/3 of
parent company network headcount)
 Banking activities in branches had to evolve: multi-tasking has
given way to specialized retail branches
 High percentage of branch managers moved to Corporate
Centers. Consequently, a great number of training courses for
new managers covering the empty positions was required
 High value vocational courses offered to Corporate Portfolio
Managers (at Bocconi University of Milan)
 Assitance to clients adapting to the new banking environment
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The Network: Future Developments
 Application of the advanced market approach to the
entire Group network
 Additional personnel shift from back-office to sales
 Subsidiaries will then develop as networks only
NETWORK / TOTAL EMPLOYEES Ratio
TARGETS
84%
77%
73%
83%
76%
CRP
CR0
CRM
CRC
CRS
 CR Mirandola will merge
in July 2006
 CR Civitavecchia: target
90%
85%
85%
85%
90%
achieved
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Individuals Segment
 Generates the greatest value
 Is characterized by high propensity to save but also...
 ...by a sentiment of mistrust in the banking system
Expected business growth
High growth potential
Pension
schemes
Potential for further
investments to exploit
good growth ratios
Consumer
credit
Mortgages
Investments
Personal
insurance
Cash Payments
Only potential for
selective investments
to improve service
quality and maintain
market shares
Bank’s positioning
The dimension of the bubbles shows the current importance of the Business Area in terms of margin
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Individuals: A Structured Approach
 An approach more focused on client’s expectations
means
 Less but more personalised commercial proposals
 Greater effectiveness - Reinstating a trust relationship
 CRM techniques are the
most important tool to
achieve the combination of the above aspects
 The underlying Data Mining Platform furnishes a deeper
knowledge of the client clusters and therefore facilitates the
construction of a keener relationship
 Furthermore,
the branch managers’ improved
professionalism, a customer satisfaction analysis and
communication strategies that will be differentiated
according to client segment will generate greater
worth from the relationship
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Individuals: What Next ?
 Full use of the CRM instrument
 Exploiting the generation turnover to facilitate the process
In 2005




64 campaigns launched and 92 events managed
450,000 commercial talks
456,000 customers with a next product assigned
only 50% of the portfolio managers regularly used the tool
 A propensity score for all the product range
 The introduction of the customer satisfaction indices
in the MBO Plans
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SMEs & Corporates Segment
 SMEs are now experiencing a dimensional growth and
international expansion
 Banks’ capacity to exploit Basel II will make certain
banks more competitive
Selective investments
to
follow
market
opportunities
Intl.
services Structured
finance
Ind. & Spec.
credit
Bank
guarantees
Expected business
growth
Investments to exploit
the expected growth of
high margin products
Factoring
Financial risk
coverage
Foreign payables/
receivables
Maintain
market shares
Agriculture financing
Leasing
Currencies
Domestic payables/
receivables
Bank’s positioning
The dimension of the bubbles shows the current importance of the Business Area in terms of margin
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SMEs & Corporates Segment
 The figures below reflect the bank’s low capacity of
attracting key clients
 BCRF is a first choice bank for a small number of its clients (8%)
 In the core clients group, BCRF obtains even lower percentages
 The aim is to grow as the first choice bank for the core
clients
from
125
250
250
500
500
1,000
1,000
2,500
2,500
5,000
1.0
1.2
1.7
2.4
3.2
4.4
6.3
10.3
2.1
Credit needs covered by
clients’ 1st choice bank (Italy)
99%
89%
76%
68%
61%
55%
46%
36%
49%
BCRF clients who recognized
the bank as a 1st choice bank
46%
43%
18%
8%
4%
4%
2%
2%
8%
Granted loans (total*)
Banks per client (Italy, avg.)
75
to 125
5,000 25,000
25,000
Core clients
* Sum of all credit lines granted by the Italian banking system or by BCRF expressed in EUR thousand
(source: Bank of Italy and BCRF)
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AVG.
SMEs & Corporates: How To Compete
 BCRF has been among the first mid-sized groups to
launch the IRB Advanced (Basel II) procedure
 The capacity to correctly assess client risks will enable
to:
 Recuperate market share in the top-client segment
 Obtain a correct profit from risks related to the worst clients
Loans by rating*
Amounts
granted
Amounts
utilized
A1 A2 A3 A4 B1 B2 B3 B4 B5 B6 B7 B8 C1 C2
* Loans by rating refers to the Parent Company’s 65% corporate segment customer base. November 2005
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Remote Banking: Powering Up & Growing
 A multi-channel approach is required today by both
corporate and individual segments
 The number of users is growing steadily and transactions are
rising even faster
 This approach is essential to acquire new, young
clients in the 30-40 age group
 Over-investments proved to be non-profitable but
innovation must remain steadfast:
 BCRF has been the first Italian bank to offer a DIGITAL
TERRESTRIAL TV (DTT) remote banking service
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The Generation Chance
 Between 2006 and 2008 a large number of employees
will reach the minimal age for retirement (about 450)
 A great opportunity is at hand for organizational and
commercial re-engineering which
remarkable reduction of costs
could
Replacements
~ 450
expected
retirements
Technology
Organisation
Group’s figures (estimates)
Headcount
reduction
17
allow
a
Opportunities
in Italian Regional Banks
Lino Moscatelli
Managing Director
HSBC Italian Banks Conference
London - January 19th, 2006